The 45L Energy-Efficient Home Tax Credit recently received a facelift with the passing of the Inflation Reduction Act of 2022. The maximum credit available to residential real estate owners increased from $2,000 per unit to $5,000 per unit and the certification model shifted to ENERGY STAR. This video takes you through the updates that take effect this year.
The demand for green, energy-efficient housing is at an all-time high. To reward this shift, the Inflation Reduction Act of 2022 significantly expanded the 45L Energy Efficient Home Tax Credit.
In this video, we break down the 2023 updates, including the increase in the maximum credit from $2,000 to $5,000 per unit. Whether you are a developer, builder, or owner, understanding these new standards is essential for maximizing your return on investment in residential projects.
The 45L Update Roadmap
1. Increased Credit Amounts
The credit value is now tiered based on the level of energy efficiency achieved:
- Energy Star Certification: $2,500 per unit for single-family; $500 per unit for multifamily.
- Zero Energy Ready Home (ZERH): $5,000 per unit for single-family; $1,000 per unit for multifamily.
- The Multiplier: Multifamily projects can increase their credit 5x (up to $5,000/unit) by meeting prevailing wage requirements.
2. Expanded Eligibility & Height Limits
Previously limited to low-rise buildings, the 2023 updates have removed the height limitation. Residential buildings of any height—from single-family homes to high-rise apartment towers—can now qualify.
Qualifying Types: Single-family, Townhomes, Apartments, Assisted Living, Student Housing, and Manufactured Homes.
3. Certification Standards
To claim the credit, properties must be verified by a third party and meet specific programs:
- Energy Star: The baseline requirement for all qualifying 45L projects.
- ZERH: A higher standard that essentially “doubles” the benefit. Builders must register as program partners to participate.
4. Stacking with LIHTC
A major win for affordable housing developers: you can now claim both 45L and Low-Income Housing Tax Credits (LIHTC) on the same project without reducing the property's cost basis.
Get Expert Assistance
Navigating the technical requirements of the Inflation Reduction Act requires a specialized team of engineers and tax professionals.
